The pound rallied on the exit polls of the general elections and continued higher afterwards, as it became clear that the Conservatives won an absolute majority.
An instant return of David Cameron to Downing 10 with no coalition negotiations was more than the markets had hoped for. The pair reached 1.5523. And it’s there once again.
Update: this didn’t take too long. After the pair paused, it shot up to new highs at 1.5536. The move seems to be USD related: the greenback is retreating against other currencies as well.
Another update: GBP/USD reached a peak of 1.5571 and certainly maintains the breakout.
Yet after the dust settled, there was some profit taking. This slide was accompanied by some USD gains that followed the positive NFP and the pair dipped under 1.54.
In the wake of the new week, we see cable making another move higher, climbing above 1.55 and hitting a high of 1.5523 – exactly the post election level.
At the time of writing, we are seeing it trade a bit lower, but still above 1.55. Will it break higher soon? If so, it will just a temporary pause. If not, this double top could turn into significant resistance.
The Bank of England didn’t rock the boat and left the rates unchanged at 0.50%, running for over 6 years already. This turned into a non-event a long time ago.
A more important event awaits us tomorrow with the release of manufacturing production. And afterwards, the BOE will have the full stage with its quarterly inflation report.
More: Can The Pound Rally For Long Or Go Far? – SocGen
Here is how the double top looks on the GBP/USD chart:
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